Asian stocks stall on Wall Street pullback, euro gains before ECB

TOKYO, Oct 26 2017 : Asian stocks stalled today, weighed as Wall Street shares pulled back from record highs, while the euro stretched gains ahead of a European Central Bank policy meeting at which it could take a major step away from accommodative policy.

Japan’s Nikkei .N225, which had snapped a 16-day winning run the previous day, rose 0.35 percent.

U.S. stocks fell yesterday on a batch of soft quarterly earnings, with the Dow Jones Industrial Average .DJI suffering its worst day in seven weeks after rising to a record peak the previous session.

In currency markets, the euro added to overnight gains to reach a six-day high of $1.1820 EUR=, prompted by expectations that the ECB would cut back on its bond-buying stimulus and take the biggest step yet in unwinding years of loose monetary policy.

The central bank, however, is still concerned about low inflation and is expected to accompany the tapering with an extension of the stimulus in a “less-but-for-longer” move.

“The focal point is how long the ECB decides to spend on tapering its bond buying. If the ECB opts to spend more than six months to taper, it will lead to thoughts that it won’t be able to move onto hiking interest rates until 2019,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“The ECB could be seen as dovish in such a case and in turn weigh on the euro.”

The greenback rose to a three-month high of 114.245 yen overnight as the benchmark 10-year Treasury yield spiked to a seven-month peak of 2.475 percent.

But the dollar pared the gains as the Treasury yield retraced its rise amid the drop in Wall Street shares. The 10-year Treasury yield last stood at 2.429 percent.

The dollar index against a basket of six currencies was down 0.1 percent at 93.601, its lowest in six days.

The pound added to overnight gains and brushed $1.3276 GBP=D3, its highest in 10 days. Sterling climbed almost 1 percent the previous day after stronger-than-expected U.K. growth data cemented expectations the Bank of England will raise interest rates next week.

Another big mover was the Canadian dollar, which slid 1 percent overnight to a three-month low of C$1.2816 per dollar CAD=D4 after the Bank of Canada left interest rates steady as expected but was seen to have sounded dovish in its policy statement.

U.S. crude oil futures was 0.1 percent lower at $52.13 per barrel following data yesterday that showed a surprising increase in U.S. crude inventories.